UNION OF INDIA AND ORS. versus STATE OF U.P. AND ORS.

Citation: [2007] 11 S.C.R. 792 · Decided: 01-11-2007 · Supreme Court of India · Bench: A.K. MATHUR · Disposal: Dismissed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

) 
Y-. 
A 
UNION OF INDIA AND ORS. 
v. 
STATE OF U.P. AND ORS. 
NOVEMBER 1, 2007 
B 
[A.K. MATHUR AND MARKANDEY KAT JU, JJ.) 
.,\ 
UP .. Water Supply and Sewerage Act, 197 5-s.5 2-Jal Sanstha~ 
an instrumentality of the State-Supplied water to Railway colonies 
c and Railway stations and also maintained their sewerage system-
Service charges demanded by Jal Sans than from Railways for supply 
of water and maintenance of sewerage-Held: Was in the nature of a 
, 
fee for services rendered by Jal Sansthan to the Union through the 
Railways and not a tax on property of the Union-Such service charges 
D not violative of Article 285 of the Constitution as property oft he Union 
was not being subjected to any tax-Constitution of India, 1950-Art. 
285. 
Taxation-Tax and fee-Distinction between-Discussed. 
E 
Jal Sans than, an instrumentality of the State ofUttar Pradesh, 
established under the U.P. Water Supply and Sewerage Act, 1975, 
supplied water to Railway colonies and Railway stations and also 
maintained their sewerage system. For rendering such senrices, the 
Jal Sansthan demanded 'water' and 'sewer' charges from the· 
F Railways. 
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" 
-·~ r . 
The demand was challenged by the Railways on the ground t~at 
they were holding the property of the Central Government for wh~ch 
service charges were not payable under Article 285 of the· 
G 
Constitution as such charges were in the nature of a tax. It was 
submitted that in view of the policy taken by the Ministry of 
Railways, Government oflndia such charges cannot be recovered 
""' ... 
as this was totally exempted. But the Jal Sansthan did not heed to it 
and initiated recovery proceedings against the Railways which filed 
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792 
j 
UNION OF INDIA v. ST ATE 
793 
writ petition before the High Court but the same was dismissed. 
A 
In appeal to this Court the question which arose for 
consideration is whether the service charges for supply of water and 
maintenance of sewerage was a fee for the services rendered by the 
Jal Sansthan and not a tax on the properties of the Railways and 
hence the exemption granted to property of the Union oflndia from B 
State taxation under Article 285 of the Constitution was not relevant 
to the present case as property of the Union oflndia was not being 
subjected to any tax. 
Dismissing the appeal, the Court 
c 
HELD: 1.1. There is a distinction between a tax and a fee, and 
hence one has to see the nature of the levy whether it is in the nature 
of tax or whether it is in the nature of fee for the services rendered 
by any instrumentality of the State like the Jal Sans than. 
[Para 9] [799-B] D 
1.2. There is no two opinion in the matter that so far as supply 
of water and maintenance of sewerage is concerned, the Jal 
Sansthan is to maintain it and it is they who bear all the expenses 
for the maintenance of sewerage and supply of water. It has to create E 
its own funds and therefore, levy under the U.P. Water Supply and 
Sewerage Act, 1975 is a must. In order to supply water and maintain 
sewerage system, the Jal Sansthan has to incur the expenditure for 
the same. It is in fact a service which is being rendered by the Jal . 
Sansthan to the Railways, and the Railways cannot take this service F 
from the Jal Sansthan without paying the charges for the same. 
Though the expression tax has been used in the Act, but in fact it is 
in the nature of a fee for the services rendered by the Jal Sansthan. 
The Jal Sansthan is not charging any tax on the property of the 
Union; what is being charged is a fee for services rendered to the G 
Union through the Railways. Therefore, it is a plain and simple 
charge for service rendered by the Jal Sansthan for which the Jal 
Sansthan has to maintain staff for regular supply of water as well as 
for sewerage system of the effluent discharge by the railway over 
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794 
SUPREME COURT REPORTS 
[2007] 11 S.C.R. 
A their platform or from their staff quarters. It is in the nature of a fee 
for service rendered and not any tax on the property of the Railways. 
[Pal'a 9) [799-C-F) 
1.3. Exemption under Article 285 of the Constitution is on the 
levy of any tax on the property of the Union by the State, and 
B exemption is not for charges for the services rendered by the State 
or its instrumentality which in reality amounts to a f~e. What is 
prohibited by Article 285 is taxation on the property of the Railways 
and it does not prohibit charge of a fee on account of some service 
rendered by the local 

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